By
President
HSA for America

Ways to Make Your HSA
Work Better For You

November 1, 2012
Vol. 8, Issue 11  

 


I hope you enjoyed my last newsletter about ways you can increase your tax deductions for health care.  Since it’s already November and the holidays are going to be taking up a lot of our time in just a few weeks, this is a good time to mention the December 1 deadline.  To make a tax-deductible HSA contribution for 2012, you must have an HSA-qualified health insurance plan in place no later than December 1st.

If you already have your HSA-qualified plan, I congratulate you.  You have until April 15, 2013 to deposit the maximum allowed and deduct it from your taxable income.  If you know anyone who wants to pay less in taxes and still doesn’t have an HSA-qualified plan, he or she needs to apply right away to make the deadline. Here are some ways to take advantage of HSA tax breaks you may have overlooked.

Tips for Stretching Your HSA Tax Deductions

Do you have an HSA-qualified plan for individual coverage?  Even if you do, you can use your HSA to pay for qualified health care expenses for your spouse, your partner or your dependents who are not covered by your insurance policy.

Remember that once you reach age 55, you can make a $1,000 "catch-up" deposit right up until you enroll with Medicare.  What if both you and your spouse are at least 55?  You can each make that additional $1,000 deposit, but your spouse will need to set up a separate HSA.

Here’s something that may surprise you about your HSA.  If you receive unemployment benefits, then you can pay your health insurance premiums from your HSA so you aren’t taxed for those payments.
It’s true that most drugs available without a prescription are not eligible to be paid for with HSA money, but insulin is an exception to that rule.  Along with insulin, over-the-counter medicines may be purchased through your HSA if your doctor writes you a prescription for them.  Of course, you’ll want to save those prescriptions with your HSA records.  Making an HSA withdrawal for anything other than qualified health care results in a 20-percent penalty.  IRS Publication 502 shows allowable HSA expenditures.

Tips for Maximizing Your HSA Contributions

If you’re just starting to buildup your HSA balance, you may want to let tax-free earnings do some of the work for you this year by not taking a distribution.  Health care expenses you incur this year can be reimbursed as an HSA distribution next year or the year after or even years from now.  Keep a record of all HSA-qualified expenses for you, your spouse and your dependents if you want to take a tax-free distribution for them in the future.

Did you know you can make a one-time roll-over from your IRA or Flexible Spending Account into your HSA?  With an FSA, you lose any money you leave in the account at the end of the year.  Now, you don’t have to if you move it to your HSA where it will keep rolling over from year to year.

And, if your spouse is over age 65 and cannot contribute to a personal HSA, he or she may still contribute to your HSA up until you enroll in Medicare.  That goes for a parent contributing to their adult child’s HSA, too.  As long as the HSA contribution goes to the account of someone who is eligible to have an HSA, it’s legal.

I hope these tips help you to get the most value from your HSA this year and throughout the years to come.  And, here’s one more thing to consider:  since plans change from year to year, you want to compare your HSA-qualified plan to new HSA policies.  If your HSA administrator is separate from your insurance company, it’s easy to switch policies without needing to move your savings.

 


To your health and wealth!



President - HSA for America

 


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